1) Suppose your bank has the following balance sheet:
Assets Liabilities
Reserves $ 50m Checkable deposits $200m
Securities 50m
Loans 150 m Bank capital 50m
Suppose the required reserve ratio is 10%. If there is an unexpected deposit outflow of $50 million how much does the bank need to get in order to maintain the required reserves? List all the possible options that bank could explore to maintain the reserve requirement. What is the most preferred option should you consider as the bank manager?
- If X-Bank reported an ROE of 12% and an ROA of 2%. What is the equity multiplier?
1) Suppose your bank has the following balance sheet:
Assets Liabilities
Reserves $ 50m Checkable deposits $200m
Securities 50m
Loans 150 m Bank capital 50m
Suppose the required reserve ratio is 10%. If there is an unexpected deposit outflow of $50 million how much does the bank need to get in order to maintain the required reserves? List all the possible options that bank could explore to maintain the reserve requirement. What is the most preferred option should you consider as the bank manager?
- If X-Bank reported an ROE of 12% and an ROA of 2%. What is the equity multiplier?
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QUESTION 1
Refer to this scenario for all of the questions on this problem set.
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BALANCE SHEET OF A MONOPOLY BANK |
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ASSETS |
LIABILITIES AND CAPITAL |
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Reserves: 500 Loans and Securities: 4,500 Other Assets: 1,000 Total Assets 6,000 |
Checkable Deposits: 5,000 Capital: 1,000 Total Liabilities & Capital 6,000 |
The balance sheet of the only bank in a simple economy is shown below. The reserve requirement is 10%. If cash in the hands of the non-bank public is $3,000, the Money Supply = ___________________.
QUESTION 2
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BALANCE SHEET OF A MONOPOLY BANK |
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ASSETS |
LIABILITIES AND CAPITAL |
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Reserves: 500 Loans and Securities: 4,500 Other Assets: 1,000 Total Assets 6,000 |
Checkable Deposits: 5,000 Capital: 1,000 Total Liabilities & Capital 6,000 |
Suppose people deposit $1,000 of their cash into checking accounts. In the balance sheet below, enter the new totals in all of the accounts, immediately following the transaction, before the bank does any new lending.
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ASSETS |
LIABILITIES AND CAPITAL |
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Reserves: Loans and Securities: Other Assets: 1,000 Total Assets: |
Checkable Deposits
Capital Total Liabilities and Capital: |
QUESTION 3
Recall that cash in the hands of the non-bank public was initially equal to $3,000. Thus, immediately following the $1,000 deposit, currency in the hands of the non-bank public = _____________
QUESTION 4
And Deposits = ______________
